Lululemon Athletica (LULU 1.62%) stock soared 8.8% through 11 a.m. ET Friday after crushing on earnings last night.
Analysts forecast Lululemon would earn $2.21 per share on less than $2.5 billion in sales in Q3, but the company reported $2.59 per share on nearly $2.6 billion in sales.
Image source: Lululemon Athletica.
Lululemon Q3 earnings
Lulu grew sales 7% in Q3, despite only a 1% increase in same-store sales. Literally all the growth was international, as "Americas" revenue declined 2% but international sales grew 33%.
Although Lulu beat the forecasts of Wall Street analysts, its earnings per share declined 10% year over year, suggesting the sales Lulu makes internationally may not be as profitable as those made in its home market.
Little wonder, then, that CEO Calvin McDonald says "our teams remained focused on driving improvements within our U.S. business," even as it continues to expand internationally.
NASDAQ: LULU
Key Data Points
Is Lululemon stock a buy?
Looking ahead to Q4, Lulu warns sales will probably decline 2%, with earnings between $4.66 and $4.76. Taken at the midpoint, this forecast is weaker than Wall Street's forecast -- about $4.93 per share in profit on sales close to $3.6 billion.
For the full year, Lulu expects sales of $11 billion, and earnings between $12.92 and $13.02. At the midpoint, this translates to a valuation of 16 times earnings for the retailer's stock -- not expensive if Lululemon can demonstrate some growth. But as of today, both sales and earnings appear to be shrinking.
If Lulu's to succeed, it may need new management. Luckily, the company also just announced that McDonald will be stepping down at the end of January, and the search for a successor has already begun. Ultimately, this may be the real reason investors are buying Lulu stock today.
